Citigroup is holding its own in the face of rocky markets and slowing global growth. But compared with a peer like JP Morgan Chase, recently engulfed in scandal, it gets little credit.

Consider that Citigroup trades at half the valuation of JP Morgan, as measured by price to tangible book value. Part of that is due to the fact that JP Morgan weathered the financial crisis well, while Citigroup was brought to its knees.

JP Morgan also is seen as having far stronger earnings power. Citi on Monday posted second-quarter results that were decent but not spectacular. Net income of $2.9bn, though ahead of expectations, was down 12% from a year earlier. Revenue also was down. But loans in the bank's core businesses were up, and its capital markets unit performed well.

Another issue dragging on Citi's valuation: the impact certain holdings have on its capital. In its results, Citi gave some new figures related to its Tier 1 common ratio as calculated under new Basel III rules and taking into account new US regulatory guidance. At 7.9%, this was the same as JP Morgan and slightly above Wells Fargo's 7.8%.

There is a big difference, though, between Citi's Tier 1 common capital as calculated under the Basel III rules, at $99bn, and the $124bn under existing Basel I rules. By contrast, JP Morgan's Tier 1 common capital is virtually unchanged under the two approaches, and Wells's actually increases slightly under the newer method.

This means Citi has big assets that do nothing to bolster its capital base. That, in turn, acts as a drag on its ability to increase capital to meet new requirements and ultimately to be in a position to increase its dividend and buy back stock. That is a particular concern since the Federal Reserve earlier this year rejected Citi's capital-return plan.

Assets that don't count toward the new capital measure include minority holdings in other financial firms, such as a brokerage venture with Morgan Stanley, and its $51bn in deferred-tax assets from losses racked up during the crisis.

One option is to shed minority holdings, most importantly the bank's remaining stake in the Morgan Stanley joint venture. Citi was due late Monday to exchange valuations with Morgan as a prelude to selling another 14% stake. Consuming the deferred-tax assets by generating profits also will help.

But with its stock trading at just 50% of tangible book value, markets are taking a view that Citi may not make much progress. That looks too pessimistic.

Finance chief John Gerspach said on the bank's earnings call there is a "simple formula" to improve the capital base and so change the market's mind: "It really is about making money."

Simple in theory. In practise, Citi still has a long road to redemption.